How Offshore Outsourcing Affects Customer Satisfaction
Abstract
An analysis was conducted by the National Quality Research Center at the University of Michigan on 150 companies and business units in North America between 1998 and 2006. NQRC created an index called the American Consumer Satisfaction Index, ACSI, which measured consumer satisfaction. The results of the survey showed that those companies carrying out offshoring recorded low scores on the ACSI regardless of the form of outsourcing practice. The drop varies depending on the company’s industry, but it can be as much as 1-5% in market capitalization, basing the statistics on historical data. Despite the demerits associated with offshoring, companies can make outsourced customer service more appealing to customers by mitigating the negatives.
Introduction
Customer service outsourcing, otherwise known as offshoring, has been the new trend in human resource management among most companies in the United States. Despite its popularity, the press has highlighted the negative impacts this move has had on the satisfaction of customers whether done domestically or internationally. The press cites setbacks such as job export and language barriers brought about by offshoring. It aims at discouraging customers from associating with those companies practising outsourcing. However, companies tend to ignore these setbacks and pursue it anyway due to the benefit of reduced labour costs related to outsourcing (Krotz, 2013).
Reflections
There are alternatives to offshoring that can be beneficial to a company, which can help it save money and still maintain its relationships with customers. For instance, the outsourced customer service provider can be equipped with all necessary information helpful to the customer, and have full authority to relay the information. However, the service provider may have limitations in attending to customers and resolving their complaints. It is the company’s responsibility to protect and safeguard customers’ confidential information, and it may not disclose their profiles and histories to the service provider. In addition, the provider may be restricted to issue credits to customers due to his or her limited authority. Therefore, companies should make informed decisions before engaging the provider due to sensitive issues such as financial control and information security. There is also the risk of jeopardizing customer relationships when the provider is involved.
Companies can also tap into the technological innovations provided by some providers as another way of mitigating the demerits of outsourcing. They can take advantage of this opportunity to improve customer service. The technologies, mostly provided by foreign providers, serve as a guide to customer service through recognition of consumer behavior patterns (Krotz, 2013).
Implications
The implication of outsourcing is that it helps companies save a lot of money in terms of labor costs despite the problems it causes such as language barriers and job export. In turn, they can invest the money to enhance the quality of services and products, or even reduce the prices instead of considering the saved money as extra profits. This can be another way of mitigating the damages of offshoring (Whitaker, Krishnan, and Fornell, 2012).
Offshoring has both merits and demerits in a company, and the demerits may outweigh the merits because it generates customer dissatisfaction in most cases. However, a company can invest the money saved to upgrade the business and improve on the quality of outsourced customer service. The company should also make wise decisions during outsourcing to determine if all its functions are suitable for offshoring. Those functions that do not concern direct interactions with customers like information technology may not be a preferred choice during outsourcing.
It is, therefore, conclusive to deduce that outsourcing customer service has negative effects on customer satisfaction and the overall image of the company. Nevertheless, a company can counter the negative effects by improving the quality of its services and products. This will shift the focus of the consumer from the provider to the excellent services provided by the company (Whitaker, Krishnan, and Fornell, 2012).
References
Krotz, J. (2013). Should You Outsource Your Customer Service? Retrieved from http://www.entrepreneur.com/article/225510
Whitaker, J., Krishnan M., and Fornell, C. (2012). Customer Service; How Offshore Outsourcing Affects Customer Satisfaction. Wall Street Journal.
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